Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts

Tuesday, July 27, 2021

What Happens When You Fail a Tax Audit?

A tax audit is a thorough examination of your taxable income and deductions by tax attorneys to verify that your tax records are accurate. 

Detection of tax errors in your tax reports could result in heavy penalties, including imprisonment. The following are some of the things that happen whenever you fail a tax audit.

The IRS Issues You With a Written Notification


Once the tax attorneys discover that you have failed in your tax audit, they issue you with a written report informing you of the tax audit findings. 

The tax attorneys normally send their findings to you within thirty days and allow you to fill in for any appeal. The audit report usually highlights the amount that you owe and the reason why you are guilty.

Assessing the Audit Report


As soon as you receive the tax audit report, the tax attorneys expect you to analyze it and send your opinion feedback. If you determine that you are guilty, you can pay the amount you owe and terminate the case. Tax auditors assume that you plead guilty to tax offenses whenever you fail to respond to the notification.

Court Appeal


The court process begins as soon as you fail to respond to IRS notification where you are assumed to be guilty. At this stage, you are allowed to present your case and defend yourself from the litigation process. 



After this, the court of law could determine that you are guilty and you have committed a tax offense. The court judge will give you reasons as to why you are guilty and charge you accordingly.

Jail Imprisonment


The court can imprison you for a term of about one year whenever they discover that you intentionally failed to file your tax returns. You are also subject to spending five years in prison whenever the court determines that you engaged in tax evasion during a specific time.

Hefty Court Fines


You can also be fined heavily in a year for every additional tax return you do not file. The court will add another fine whenever the tax attorney establishes that you filed fraudulent tax returns.

Failing in your tax audits is a severe offense that will result in hefty fines and imprisonment. It is crucial that you file your returns on time and reveal the correct information. You can appeal against the penalties imposed by the IRS in case you fail a tax audit.


Tuesday, November 17, 2020

4 Things to Keep in Mind if Your Personal Taxes Are Audited




Few terms are more dreaded than that of an audit. The ultimate boogeyman of tax season, only about .5 percent of all taxes get audited every year. If your personal taxes do get audited, though, it's good to keep a few basic facts in mind.

More than One Type of Audit


While most people refer to audits as if they're a single type of process, the truth is that there are three types of audits. The most common, the mail audit, usually just requires you to mail more paperwork to the IRS. 

The next, the in-office audit, will require you to go to an IRS office to meet with an auditor so that he or she can go over your returns in person. The final, the field audit, is incredibly in-depth and also quite unlikely to happen when dealing with an individual's taxes.

An Audit Doesn't Mean Punishment


Though an audit certainly sounds scary, it's not a punishment. Audits occur for many reasons but getting audited doesn't automatically mean that you've done something wrong. 



There might have been a big income change from year to year that's sent up a flag at the IRS or you might just have the kind of complicated taxes that bear more investigation It's entirely possible to walk away from an audit without having to pay extra money or suffer any other sort of penalties.

Take it Seriously


Though it is not necessary to panic just because you are being audited, you must take the process seriously. Mail from the IRS absolutely cannot be ignored and you should comply with any requests from the agency as expediently as possible. 

If you are having an issue gathering paperwork or you run into some other problem, you should communicate with your IRS contact as quickly as you can so that they know that you're still doing your best to comply.

Work with Professionals


Finally, it's vital to work with professionals like those at Harris Shelton Hanover Walsh PLLC and other offices. These individuals have not only been through the process of audits before, but they're experts at helping you to navigate through any difficulties that you might encounter along the way. 

Working with a seasoned tax professional is not only the best way to make sure that you don't have to worry about being audited, but also to make it through an audit unscathed.

Don't panic if you get audited. Make sure that you get professional help and that you comply with any orders from the IRS. This may be the first step in a long process so be prepared for a longer journey than you might expect.



Sunday, February 24, 2019

What You Need to Know About the Underpayment Penalty



The definition of the underpayment penalty is a tax penalty enacted on an individual for not paying enough of his or her total estimated tax and withholding. Most places of employment will withhold taxes automatically. Checking a pay stub will show how much tax has been deducted and paid to the state and federal so people can keep track of it for their records.

How Do You Get an Underpayment Penalty?


Taxes can be confusing when multiple streams of income are coming in and estimating how much tax should be withheld from each one. The penalties come about when an estimated amount of the income you've made isn't paid to the IRS. 


Taxes from income are estimated on a quarterly basis and normally paid out before the quarter is up. These taxes can be applied to rent, self-employment, interest, etc. Basically, any source of money coming in or out is taxable.

The underpayment penalty comes into play when not enough of the estimated tax has been paid each quarter. This doesn't mean the IRS is going to come at you full force if you don't pay enough tax each quarter, weren't aware of it, or didn't have enough money to pay.


What Do You Do When Faced with the Penalty?


Whether your income comes in from a side business or somewhere else, if you do accrue a penalty the first step is communicating with the IRS. Finding out how much you owe in taxes and whether or not the penalty can be forgiven depends on your financial situation. People facing the penalty for the first time due to an error and not neglecting the responsibility will face less harsh consequences.





Making an appointment with a tax attorney at this point would be in your best interests, especially if you owe a significant amount to the IRS. Every financial situation is different and a tax attorney can help you navigate how much you need to pay back in taxes. 


Penalties can increase the amount you owe the IRS the longer the taxes go unpaid, so you want to get in touch with the IRS as soon as possible to pursue the best course of action.

Underpayment tax is calculated by income earned and the amount owed, and when penalties come into play the amount can easily increase. If, for example, you were unable to pay taxes last year due to not having enough money, you can most likely arrange a payment plan with the IRS to pay off the different amount. 


Keep in mind, there are also exceptions where the underpayment penalty will be waived depending on certain circumstances, like a natural disaster, paid at least 90% of taxes owed, etc. Investopedia does a great break down of exceptions of the situations and circumstances of when the penalty can be waived.

How Do You Avoid the Penalty?


The best way to avoid the underpayment penalty is to keep records of each source of income coming in and estimating the taxes needed to be paid on both. If you have multiple sources of income, whether from self-employment, rent, etc., you may want to talk to an accountant to help you keep track of how much is owed. 


If not, you can pay taxes quarterly for each source of income so the amount doesn't evolve into a landslide.

Make sure to pay each amount by their due dates and don't be late on payments. If for any reason you suspect you'll be unable to pay the estimated amount of taxes, be sure to get in touch with a tax attorney and explain the situation to them. 


They can advise you on the best course of action to avoid falling under the penalty, or get in touch with the IRS to let them know about the situation. The worst thing you can do is to not pay the taxes and ignore it hoping the problem will go away on its own.



Thursday, January 30, 2014

When Facing the IRS Make Sure You Have A Qualified Tax Attorney

Exterior of the Internal Revenue Service offic...
Exterior of the Internal Revenue Service office in midtown New York. (Photo credit: Wikipedia)
Literally dozens of questions can be asked of a tax attorney in Los Angeles. Some of the most important are included within the context of this article. A tax attorney can help you to avoid jail time for long-term tax evasion in some cases and can also help you to reduce payments, interest or even settle on a smaller amount for repayment. Getting in trouble with the IRS is not something you want to do as an individual or as a business owner. 

How to Make a Payment Plan with the IRS to Avoid Penalties and Tax Evasion


After preparing your taxes, you may not know quite how to go about working out a payment plan with the IRS when you owe a considerable amount. It is ideal to seek the help of an attorney as they better understand the policies, laws and restrictions that may be put in place in order to make a feasible payment plan. 

Penalties That Can be assessed


Penalties, mostly from interest, can be assessed when you do not adhere to the agreement with the IRS, are late filing or are late paying. Other penalties can be put into place depending on your situation; some serious penalties can include a wage garnishment or a bank account garnishment. The IRS can also put a lien on your vehicle and/or property until the monies owed are paid.

How to Avoid Penalties


You will want to ask your attorney how to avoid penalties. The attorney may suggest filing for an extension to give you more time to prepare your taxes. In most cases, this is a six month extension. At this time, you must at least have your return filed. The return does not have to include payment at this time. 

How to Keep Better Tax Records


An attorney may be able to help you better organize your tax files. You should ask how to organize receipts and expense reports in order to properly calculate these items into your itemized deductions better. You should also ask what items to disregard keeping records for as some items cannot be deducted.

What Items Need to Be Kept and for How Long?


Generally speaking, tax records should be kept for at least 5-years. This means that you will want to keep all items used to file taxes in a box in storage or in files on a computer for at least five years. This should be items such as W-2’s, 1099s and any other documents proving income or revenues. You should also keep utility reports, vehicle usage reports, business expenses, office supplies and equipment purchased to name a few items.

Keep these questions in mind when you seek the help of a tax attorney. It is also a good idea to keep a list of questions written down to take with you or bring up in a phone conversation. The only way that you are going to better understand what can get you in trouble and how to avoid making mistakes in the future is to ask.


Saturday, March 9, 2013

Start Filing Your Tax Return With These 6 Steps

IRS Form W-9
IRS Form W-9 (Photo credit: Wikipedia)
By Neda Jafarzadeh, a financial analyst with NerdWallet Investing. NerdWallet helps consumers make better financial decisions and compare total costs to find the best broker for their needs. 

If you haven’t already started preparing your 2012 tax returns, you will want to get started as the April 15th deadline is fast approaching. To get started, consider the following six tips: 

Tip 1: Know If You Need to File


If you aren’t sure whether you need to be filing a tax return for 2012, the IRS has a page that helps you decide whether or not you need to be filing. If you’ve decided that you do not need to file a tax return, keep in mind that you won’t be able to take advantage of the various credits that would otherwise be available to you. For example, if you made less than $50,270 in 2012, you may quality for the Earned Income Tax Credit (EITC), or if you were a college student in 2012 or your dependent was a student, you may be eligible to receive the American Opportunity Tax Credit. 

Tip 2: Taxable vs. Nontaxable Income


While most types of earned income is subject to taxation, other types such as child support payments, gifts, inheritances and welfare benefits, are not. In addition, keep in mind that if you received a refund, credit or offset from the state, you may be required to include that as income even if you did not receive a Form 1900-G. To learn more about what income is subject to taxation, check Publication 525 on the IRS page. 

Tip 3: Finding Forms and Publications


There are numerous ways you can get the forms you need to file your tax return. One way is it get the forms online or by phone if you call 1-800-TAX-FORM (800-829-3676) between 7:00 AM to 7:00 PM, Monday through Friday and request that they be mailed to you. You can even find the forms at your local post office or public library. 

Tip 4: Don’t Get Scammed


Tax scams are more common than you might think and the IRS has gone to great lengths to educate the public on recognizing and reporting these scams. If you aren’t sure whether you’ve fallen victim to a scam, the IRS has set up case scenarios to help you identify common scams, usually involving phone scams or identity theft. If you know you have fallen victim to a scam, you can use Form 3949-A to report it to the IRS. 

Tip 5: Get Help


If you are planning on using a DIY tax software, make sure you read customer reviews for the tool to see if your needs will be appropriately satisfied. NerdWallet also ran a comparison of the top two softwares available H&R Block and TurboTax, so feel free to reference that resource as well. If you plan to hire a professional tax preparer, do check his qualifications by asking for his Preparer Tax Identification Numbers (PTIN). 

Tip #6: Use Tax Credits Available to Parents


If you are a parent, be sure to look into the tax credits that are available to you like the Child and Dependent Tax Credit. You should be eligible to receive this credit if you have a child under the age of 13 and had to pay for a caretaker while you went to work or while you looked for work.



Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics